KiwiSaver funds break over $100b, withdrawals up by 19%

Funds invested in KiwiSaver now exceed $100 billion. Photo / NZME

KiwiSaver investments topped $100 billion for the first time over the March year but withdrawals were up by almost 19% over the same period, the Financial Markets Authority (FMA) says in a report.

The FMA’s latest KiwiSaver annual report shows funds reached $111.8 billion – up 19.3% from $93.6b in the previous year.

John Horner - the FMA’s director markets, investors and reporting - said breaking through the $100b mark, for a relatively small country like New Zealand represented a “coming of age” for KiwiSaver.

The report showed withdrawals were up by 18.8% at $5b during the period.

People 65 years or older continued to be responsible for a large majority of withdrawals by value, up 6.4% from last year to $3b.

The report said $1.2b was withdrawn by almost 35,700 people for a first home purchase.

The FMA said the year’s growth in funds was due to a combination of strong investment returns of $13.1b, and the inflow of $11.2b into KiwiSaver through contributions of members, their employers and the Crown.

“For many New Zealanders, KiwiSaver may be their first or only investment and a large part of their retirement savings and ultimate financial security,” Horner said.

“KiwiSaver is designed with the purpose of improving individuals’ well-being and financial independence, particularly in retirement, and it was pleasing to see individual contributions through salaries and wages were up to an all-time peak of $5.9 billion this year,” he said.

Total fees charged by KiwiSaver providers increased by 18.9% to $789.6m.

“While we have seen a gradual decrease in fees as a percentage of funds under management over the last 10 years, this wasn’t continued in the 2024 data,” Horner said.

“As KiwiSaver grows, I expect to see the benefits that come with economies of scale shared with KiwiSaver members.”

During the past four years, the overall investment profile of KiwiSaver had skewed toward “growth”, driven by more investors making active choices that were in line with their long-term retirement goals.

There are now 3.3 million people invested in KiwiSaver, representing about 62% of the total population.

Of those, almost three million have selected their own provider and fund.

The rest are default-allocated scheme members, who have been automatically enrolled into one of the six default funds.

“Growth funds now represent 46% of total funds under management, with $51.4b invested, and a total of 1.53m investors selecting a growth fund,” Horner said. “This has grown rapidly over recent years, more than doubling from $24.5b in 2021.

“Contrasting this year’s report to previous years, we can see how investor behaviour has changed over time, together with the profile of the funds being selected.”

The FMA has said for some time that younger investors, saving for retirement, should consider funds with more growth assets, as these are more suited to a longer investment horizon.

Horner said that with KiwiSaver in its 17th year, investors have become more comfortable with the long-term nature of KiwiSaver.

“We believe this is why almost half of all KiwiSavers have moved towards more growth-oriented funds.”

KiwiSaver is small compared to its Australian counterpart.

Australia’s super scheme - established by the Keating government in 1992 - is now worth about A$3.7 trillion ($4.04t), making Australia the fourth largest holder of pension funds in the world.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.